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How To Deal With Under Employment And Being Furloughed

How to deal with a furlough

by | Apr 28, 2020 | Under Employed

Background On The COVID-19 Furloughs

The coronavirus (COVID-19) pandemic has created economic uncertainty across the world.

In many countries companies are reacting to the economic disruption of their businesses which includes taking drastic measures to cut costs.

Employees are required by their employers to take time off from work and cannot work, effectively taking a leave of absence. 

It has also led many governments to create short-time working or furlough initiatives. They are not lay-offs but they are disconcerting, cause stress and uncertainty.

This is especially so for those who cannot work from home during the COVID-19 crisis. For some workers, this may be the first time they’ve been furloughed.

In Europe companies have furloughed staff, the number of the working population affected totals up to 25% or more in some countries. In some countries like Germany or Switzerland, Kurzarbeit as it is known is a very well established scheme, in the UK it is not so commonly used on a widespread basis. 

Each country has its own regulations and terms. Redundancies or lay-offs are not usual as this measure is taken to avoid such situations.

Countries like Switzerland allow for both employers and employees to terminate their employment contract during a period of reduced working hours subject to any applicable notice periods. The Swiss employer cannot avoid its legal responsibilities and must pay employees their full wages for the duration of the notice period, regardless of whether full employment is available or not.

A pandemic related furlough is meant to be temporary – meaning employees won’t work or get paid for a period, but they’re technically still employed by the company. Jobs are still left open and employees are expected to return to work when the company is ready.

Furloughs are actually quite common in some industries such as construction, farming or hospitality where seasonal workers are not employed for periods or during a low season. They receive government unemployment benefits within a recognised related scheme and return to work when needed.

The pandemic has impacted businesses and companies are seeking ways to reduce costs, at the same time the governments are trying to minimise the economic disruption to their countries.

Employee costs are one of the largest at any company. When times are financially tough as in 1990 or 2008 labour cost reduction is one of the first places a company will look. Discretionary costs such as marketing, training and capital investments in new equipment are other areas given a second review.

The furlough schemes are normally 3 months long in Germany, Austria and Switzerland as elsewhere. The COVID-19 pandemic has meant many governments have taken a 6 month view to any government backed furlough scheme. Many company CEO`s are in unknown territory and together with world leaders are looking to each other to see what measures could work or are working. 

The Company Benefits and Costs of Furloughs

For companies, the biggest benefit of a furlough is that it can help the business stay solvent and maintain its trading activities during tough financial times. It places them in a good position when the economic conditions improve to bring back many if not all of its staff.

For employees who are furloughed, they have the promise of a job to return back to when the pandemic or other situation is over.

In countries such as the USA or Switzerland, this is especially important because employees retain their health insurance and related dental or other benefits for a certain time. Employees rate this highly as a benefit because in some countries like the USA, companies are not normally required to continue providing coverage. An obvious issue should a person be hospitalised and be required to pay for treatment. More is explained in this article written by the Guardian newspaper.

A downside of furloughs for companies is that their workers may use the time off to seek a new job. The terms of a furlough are usually specific in each country or to each company in the USA. A number of companies have paid an additional bonus to key staff and required them to sign an undertaking which binds them contractually to return to work after the furlough. It is unusual but the skills and knowledge of the employee mean that in uncertain times, new measures to retain key staff are required.

The Employee Benefits and Costs of Furloughs

It all depends on which country you are a resident of and where you are reading this post.

The furloughs caused by the COVID-19 pandemic have been especially hard because they came in fast and the pandemic is like rolling thunder across the globe. No one knows when the health crisis will end.

There are some countries where no furlough benefits are available, others a limited amount of support and others like Austria or Germany where an advanced scheme is in place designed to minimise permanent layoffs and loss of employment.

If you get furloughed, it is important to know what the exact terms and conditions of the furlough are, you will not be alone. 

Firstly keep calm and get as much information from your employer as you can. The level of communication and knowledge does vary by employer and HR or company size. Expect to do some research at your local unemployment office or on the Internet.

Ask about:

Health benefits during the furlough and sick leave if applicable and procedures

In the USA or elsewhere if the company is no-longer providing health benefits, you’ll need to apply for health insurance immediately through your broker, online or the US State health insurance marketplace.

Working arrangements and expectations

This is determined by the scheme your employer has signed up for and your employee working status if you are working salaried, on term contract or part-time. A schedule will need to be agreed and you shouldn’t work except on the days or weeks that you’re required to work.

In some countries or at some companies mandatory holiday leave (paid or unpaid) is included in the time off calculation. 

Ask HR or your employer if you can be paid for any carried over leave from last year or accumulated until now if you are asked to take unpaid leave. This is especially useful if you are working 60-80% and it will offset any loss of salary before you return and make up any extra hours owed.

It is always worth asking the question.

 

Unemployment or Under Employed 

There are a few other things to do as soon as possible if you get furloughed and you think you may be under employed.

In normal circumstances, a worker would have to be fully laid off to qualify for unemployment benefits. The pandemic has changed that and most European countries and the USA or Canada have expanded unemployment eligibility because of COVID-19.

The schemes do vary yet at the same time there could be a record number of people registering creating a backlog.

A number of people have sought additional employment after being furloughed. They have felt under-employed and have been approached by smaller software and technology companies to work for them on a day or fixed number of hours per week basis.

Income during a period of unemployment benefit claim is normally reported and consideration should be given to the amount of net income which can accrue. Reports in the UK of farm worker shortages, in the USA of CVS or Walmart needing warehouse staff are just a few of the more well known work areas people found work. 

 

Personal Finances During A Furlough 

Government scheme money or unemployment benefits may take a little time before they arrive in your bank account.

If you have not had to think of a budget before now, it will be a good time to start so you know what you spend you money on. There are bound to be a number of items you will cut and treat as unnecessary expenses.

For those who had a large portion of their salary paid on a discretionary basis ( tips, guaranteed overtime, zero hour contracts), see if you can negotiate with your landlord, mortgage company, or other creditors.

Many financial institutions and landlords will be sympathetic during the pandemic especially knowing you still have a job and will be returning back to work. 

One thing you should avoid is taking out is any risky loans, some of the interest rates on offer are 30% plus and some ask for security on assets you need like your car or your home. the cost of borrowing is not only high, many have related fees or onerous default or late payment clauses buried in the fine print.

It is not all doom and gloom – there will be happier times ahead 

The coronavirus pandemic has wreaked havoc on global economies. Never in living history have so many people been subject to such a massive amount of employee furloughs.

A furlough is meant to be temporary, a furlough is tough, it can be stressful as well.

The answers to a loss of income, uncertainty of returning back to work weigh heavily on a lot of people. You are not alone and it helps to know this critical time will be over, we hope with us all in good health, it could be a time to improve your network, take your mind of the situation contacting old friends and colleagues. 

You could also look for free or low-cost online career training or skill refresher classes. These will all place you in a good position to help you to make use of your time and avoid any lock-down issues of “looking at the four walls of your apartment living room!”

When measures are eased, the return to work will require a plan as the furlough ends and hopefully by the end of 2020, we will celebrate a new year with joy as we enter 2021.

 

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